The True Wealth of Nations

The Ethics and Economics of Prosperity

Appendix A:

Exploring the Fundamental Hypothesis

The Research Project on Theology and Economic Processes is designed to explore a fundamental hypothesis that embodies the best of both economic insight and theological concern:

The economic and cultural criteria identified in the tradition of Catholic social thought provide an effective path to sustainable prosperity for all.

Catholics claim no monopoly on insight here. In fact, in the natural law tradition, insights into the prudential conduct of life are available to all reasonable persons. Thus one would expect to find large areas of overlap of Catholic social thought with other religious traditions and secular science. Nonetheless, this hypothesis makes an empirical claim that can and should be applied to a variety of debated issues of economic life.

Where We Have Been Economically

Fifty years ago, this fundamental hypothesis might have been scorned by the vast majority of economists and other experts involved in the work of economic development, whether at international institutions such as the World Bank and the International Monetary Fund or at research universities across the industrialized world.

Today, however, after decades of unfulfilled expectations about economic growth in many of the poorest nations of the world, the intellectual climate is shifting. The heads of the World Bank and the IMF, along with their staff economists, have met with bishops and lay leaders in the Church over the issues such as third world debt. The World Bank has worked with the Archbishop of Canterbury to sponsor international gatherings of religious leaders to discuss development issues. Within economics, scores of secular economists have done theoretical and empirical work on previously "non-economic" issues such as cooperation, trust, moral conviction, and the effects of religious faith on economic growth. Nobel laureate Amartya Sen has, for example, proposed to understand economic development as most fundamentally a development of freedom and of those capacities in people necessary for supporting self and family. Kenneth Arrow, another Nobel Prize winning economist, has argued for the importance of trust and other moral relations for economic growth. In sum, we see today a greater openness in development circles to the importance of moral, cultural, and religious factors in economic growth.

Where We Have Been Theologically

Not only are we in a new situation regarding economic thought, the same is true regarding theological reflection. The three millennia of the Judeo-Christian tradition are rich with commentaries and analyses of economic life, a vast storehouse of wisdom that remains

authoritative. But because ours is a living tradition, more fundamental insights from earlier eras win out over less fundamental ones. It has become clear that traditional attitudes towards three aspects of economic life are no longer sustainable: suspicion of the role of incentives in the creation of wealth, doubts about the ethos of trade and business, and disdain for the role of self-interest in economic life.

For many centuries, Christian thinkers – as well as their secular counterparts – did little reflection on the creation of wealth. As Augustine put it in addressing his wealthy listeners, "You found your wealth here." This view was quite understandable, since in the pre-modern world, the wealthy were almost exclusively those who owned large tracts of land, typically used for agriculture and mining. Since the land and minerals had been created by God, and since nearly all the labor was done by others, little attention was paid to the question of incentives for the creation of wealth. The wealthy rarely seemed to work hard. Similarly, little attention was paid to the possible disincentives that can be created in the lives of the poor if they become dependent on the charity of the wealthy instead of moving to sustain themselves. The widespread concern for the origin of wealth and the role of incentives in economic life arose only in the last three centuries.

Similarly, Christian thinkers – and most non-Christian scholars as well – were deeply suspicious of the "businessmen" of their day, merchants: people whose work involved buying goods to sell them to make money so they can buy more goods to sell. As Thomas Aquinas described it, "trading, considered in itself, has a certain debasement attached to it." So many in business seem to succumb to avarice that thinkers from Plato and Aristotle onward advised against taking up the trade. Economic activity was regarded as a "zero sum" game: with only a finite pool of wealth available, those who possessed it were regarded as doing so at the expense of others. Much more recently, economic thinkers such as Adam Smith taught that there are discernable reasons why some nations are wealthier than others – reasons that rest on the daily economic productivity of ordinary people – and that wealth is not fixed. As a result both parties to an economic exchange can end up better off than before.

The third traditional presumption that cannot be sustained is the time-honored Christian view of self-interest. Related to the suspicion of merchants just noted, any exertion of self-interest was often interpreted to be morally wrong, with real altruism in service to God and neighbor the only morally respectable stance. Yet from the time of Bernard Mandeville three centuries ago, the primary moral defense of economic freedom has been that the self-interested choices made by ordinary people in the market conduce to the economic well-being of the community. This claim is frequently overstated by advocates of free markets, but Christians have come to realize that a blanket condemnation of self-interest is not warranted ethically. The exercise of initiative, self-reliance, and a concern to provide economic security and even some improvement in economic well being for self and family is a natural and moral dimension of life. As Bernard Lonergan taught concerning the vitality of the market system, "what is needed is not a dam to block the stream, but control of the riverbed through which the stream must flow."

Where We Are Now: The Work to Be Done

As indicated in the main statement, a significant shift in the approach of the Catholic Church began with the encyclicals of Pope John Paul II, especially Centesimus Annus. It argued that the creation of wealth in a market-driven economic system could, in the right conditions, promote the common good. Business firms could be structured to serve this greater good, with profit playing a constructive role. And the entrepreneur, who was earlier seen as the epitome of the greedy businessman, was cast in a better light by John Paul: "It is precisely the ability to foresee both the needs of others and the combinations of productive factors most adapted to satisfying those needs that constitutes another important source of wealth in modern society." (CA 32) None of this should be interpreted as altering the ultimate goal of humanity – unending life in God – but it does recognize the importance of economic life, the substratum for all of human life on this earth.

Thus today, Christian intellectuals have a their disposal a more subtle and realistic approach to economic life – at the same time that economic specialists exhibit more openness to the importance of culture, morality, and religion than at any other time in the last century. And yet, there has been surprisingly little done in response by religious intellectuals, even at Catholic universities.

The Project on Theology and Economic Processes at the Institute for Advance Catholic Studies is dedicated to exactly this interface of faith and prosperity. To do this, the Project will stand on two legs. The first will be first-rate intellectual inquiry into the main themes requiring attention if the fundamental thesis is to be developed further. The second will be a small set of carefully chosen practical initiatives designed to test the fundamental hypothesis in concrete situations. Appendix B lists a number of possibilities that might be undertaken. Much work remains – challenging, hopeful, exciting work.